MBank announced today that it will close all of its accounts with marijuana businesses in the next few months. The bank cites a lack of capacity and resources to service the demand as the reason for the closures, despite marijuana businesses paying sizable application fees and up to $1,000 per month in monitoring fees.
The news comes months after MBank announced plans to begin serving Colorado marijuana businesses and then suddenly changed its mind, saying the small Oregon bank did not have the infrastructure to handle the overwhelming demand for its services. The Denver Post reported that federal regulators were behind the change of heart in Colorado.
MBank was the only bank in the State of Oregon providing banking services to the cannabis industry, and has approximately 70 marijuana-related businesses as customers. The bank will issue 60-day notices to its cannabis clients to let them know it will not longer offer banking services. That leaves many cannabis businesses back to dealing exclusively in cash, which creates administrative and security issues.
All banks are subject to federal laws including but not limited to the Bank Secrecy Act (BSA), which is administered by the Financial Crimes Enforcement Network (FinCEN), a division of the Department of Treasury. Under the BSA, banks must report to the federal government any suspected illegal activity, including transactions associated with marijuana businesses. FinCEN issued guidelines in February 2014 for banks that set extensive requirements for financial institutions to meet if they want to offer bank accounts to marijuana businesses. The regulatory expectations are quite high and require a great deal of resources, including due diligence prior to setting up accounts and ongoing monitoring of accounts once opened. The guidance has not provided comfort to the majority of the banking industry, and may have proven to be not viable for one of the few banks that was willing to enter into the cannabis space.